Correlation Between Amazon and Oil Terminal
Can any of the company-specific risk be diversified away by investing in both Amazon and Oil Terminal at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Amazon and Oil Terminal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Oil Terminal C, you can compare the effects of market volatilities on Amazon and Oil Terminal and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Amazon with a short position of Oil Terminal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Oil Terminal.
Diversification Opportunities for Amazon and Oil Terminal
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Amazon and Oil is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Oil Terminal C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil Terminal C and Amazon is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Amazon Inc are associated (or correlated) with Oil Terminal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil Terminal C has no effect on the direction of Amazon i.e., Amazon and Oil Terminal go up and down completely randomly.
Pair Corralation between Amazon and Oil Terminal
Given the investment horizon of 90 days Amazon Inc is expected to generate 1.3 times more return on investment than Oil Terminal. However, Amazon is 1.3 times more volatile than Oil Terminal C. It trades about 0.09 of its potential returns per unit of risk. Oil Terminal C is currently generating about 0.01 per unit of risk. If you would invest 18,366 in Amazon Inc on September 12, 2024 and sell it today you would earn a total of 4,138 from holding Amazon Inc or generate 22.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Amazon Inc vs. Oil Terminal C
Performance |
| Timeline |
| Amazon Inc |
| Oil Terminal C |
Amazon and Oil Terminal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Oil Terminal
The main advantage of trading using opposite Amazon and Oil Terminal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Oil Terminal can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Oil Terminal will offset losses from the drop in Oil Terminal's long position.The idea behind Amazon Inc and Oil Terminal C pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Oil Terminal vs. Digi Communications NV | Oil Terminal vs. Erste Group Bank | Oil Terminal vs. TRANSILVANIA LEASING SI | Oil Terminal vs. IM Vinaria Purcari |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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